Donald Trump tariffs: China promises to retaliate to ‘trade war’

US President signs off on steel and aluminium import tariffs3:27

Donald Trump has signed off on a 25% tariff on foreign steel and 10% tariff on aluminium, Canada and Mexico will be exempt amid NAFTA talks.
There will also be a 15 day period for exemptions to be negotiated for other nations including Australia.

China’s Foreign Minister Wang Yi warned the US could be making a huge trade mistake. Picture: Andy Won/APSource:AP

The tariffs will become effective in 15 days, with exemptions for Canada and Mexico taking place “immediately”.

Mr Trump said US steel and aluminium industries had been “ravaged by aggressive foreign trade practices” in a clear message to Asian and European trading partners.

The tariffs, worth billions of dollars, has already sparked retaliatory sanctions from the European Union.

The EU said this week that it was ready to retaliate against Mr Trump’s tariffs — of 25 per cent on imported steel and 10 per cent on aluminium imports — with countermeasures against iconic US products like Harley Davidson motorcycles, Levi’s jeans and bourbon.

While China has not yet specified what action it will take, a stinging editorial in theGlobal Times last night warned it would not be bullied by Mr Trump’s “trade war threat”.

The editorial in the communist government’s state owned newspaper accused the US of being the first country “to have clamoured for war against the entire world, noting the battlefield was taking place in the global economy.

“January’s US trade deficit with China and the rest of the world continued to expand,” the editorial reads.

“Trump is worried. But his anxiety is useless. The natural law of economics cannot be reset at his whim.”

It also warned China would not be bullied by tariffs.

“It must retaliate against US tariffs that forcibly interfere with Sino-US trade and violate World Trade Organisation rules. China must show it won’t be bullied,” it reads.

Mr Trump made the announcement this morning. Picture: Mandel Ngang/AFPSource:AFP

HARMFUL EFFECT

Speaking to news.com.au, Program Director, Trade and Investment for the US Studies Centre at the University of Sydney, Dr Stephen Kirchner, said the tariffs wouldn’t have a huge effect on China in the interim.

However, Dr Kirchner said Beijing would be concerned that this would just be the start of a series of protectionist measures Mr Trump could take against the country.

“China has larger concerns than just steel tariffs,” he said.

He said if Mr Trump would have made a more effective impact if he had gone through the World Trade Organisation with allies on board.

Dr Kirchner also warned the tariffs could have another adverse effect, even if Australia was exempt.

“A tit-for-tat trade war between the two largest economies is bad for world trade and that could adversely affect Australia because we have a large open trade sector,” he said.

“Even though we may be exempt, we’ll be affected due to our reliance on our commodity exports to China,” he said.

“As tariffs on steel and aluminium come into play, there will a negative effect on demand for iron ore and coal, as well as prices for these commodities.”

Mr Eliseo said we are already seeing this with iron ore down several per cent in the last few days.

“In turn, a fall in the price of these commodities will have a direct negative impact for the federal government, pushing the deficit higher, and tying their hands to some degree when it comes to the stimulus measures they’d like to implement in the local economy,” he said.

Mr Trump said his move was about protecting US workers. Picture: Mandel Ngan/AFPSource:AFP

NEGATIVE IMPACT

A former senior adviser for the US Department of Commerce has warned the tariffs could come back to bite the US.

Sean King, an Asian expert and senior vice president of New York-based Park Strategies told news.com.au that going after our allies over steel only hurts US strategic interests.

“But I have no problem with our getting real with geopolitical rival Beijing over its entrenched contempt for US intellectual property rights,” Mr King said.

“Human software issues like intellectual property will increasingly dominate and define tomorrow’s trade battles and is an area where US firms excel.”

Mr King said it was good the US was taking a “worthy stand” but said it also served as a reminder that the US shouldn’t have ever withdrawn from the trans-Pacific Partnership (TPP).

This, he said, would have given US companies trading alternatives around and beyond mainland China while protecting their intellectual property.

HOW CHINA COULD BITE

Beijing is unlikely to take the move lying down.

Wendy Cutler, Vice President at the Asia Society Policy Institute and former acting deputy US trade representative, warned it was possible China could enact its own duties that would hurt US exporters.

In an interview with CNBC last week, she said she believed China would respond by raising tariffs on certain US products that would in tune hurt US exporters, particularly in the agricultural sector.

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